Downturn in Turnover

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CFO turnover at big companies dropped by 28% last year, as boards shied away from nonessential change and private-equity firms slowed their efforts to woo public-company executives, according to new data from executive-recruiting firm Heidrick & Struggles.

Only 13% of all Fortune 1,000 CFO seats turned over in 2009, down from 18% in 2008 and 19% in 2007. Still, those numbers aren’t that unusual in the broader sweep of history. “2007 and 2008 turnover levels were definitely higher than we had experienced before, so this is in some ways a return to normal,” says Michele Heid, head of the financial officers practice at Heidrick & Struggles.

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Other hiring trends continued more or less unchanged. As in past years, the split between internal candidates who won the CFO role and external hires was about 50-50, with a slight preference for internal contenders in 2009.

Among those internal hires, also as before, the majority came from top accounting- or controller-type roles. Thirteen percent of those positions were filled by treasurers, up slightly from 11% in 2008.

The biggest change was in the number of new CFOs coming from general management roles — 22%, compared with 12% in 2008. “We’re seeing a number of people who have been trained in finance go out to be a president of a division and then come back as [corporate] CFO,” says Heid. The trend highlights that “this knowledge of operations is just critical for CFOs,” she says.

For external hires, the preference for a sitting CFO was even more pronounced last year, with 61% of newly appointed CFOs coming from such a position, compared with 55% in 2008. Divisional CFOs had the next-best shot but were a distant second, filling only 15% of the available roles.

Companies often find it hard to justify bringing in an outside divisional CFO who has not been a corporate CFO before, comments Heid, particularly if they have a strong bench of internal contenders who already know the company. While top CFOs from the outside also lack the institutional knowledge, they bring “[the experience of] having already presented at the highest levels, to boards and other external constituencies,” says Heid, something most divisional CFOs lack.

The lowest CFO turnover rates were in the consumer, financial services, and technology segments, at 9% each. Telecommunications had by far the highest rate at 24% (though it is also the least-represented sector in the Fortune 1,000).

Looking ahead, Heid predicts only a slight uptick in CFO turnover. “While I would expect the turnover level to increase slightly in 2010, I would not expect it to reach 2007 levels,” she says.